Tax Court: Fifth Third Equipment Finance Co. v. Dir., Div. of Taxation,span> Docket No. 013380-2018, opinion by Sundar P.J.T.C., decided February 23, 2021. For plaintiff - Kenneth R. Levine argued the cause, Kyle O. Sollie, attorney of record and on the brief; Matthew L. Setzer, on the brief (Reed Smith, LLP, attorneys); for defendant - Michael J. Duffy (Gurbir S. Grewal, Attorney General of New Jersey, attorney).
Held: N.J.S.A. 54:10A-4(k)(6)(E) (Subparagraph E) disallowed a deduction of net operating loss (NOL) carryovers for tax years 2002-2005 (100% for 2002 and 2003, 50% for 2004 and 2005), but also extended the normal seven-year period of the carryover losses for a period commensurate with the suspension period(s) “if and only to the extent” the NOL carryover deduction was disallowed under Subparagraph E. Defendant’s construction that Subparagraph E does not permit extending the carryover period if in a suspension period there was no income to absorb an NOL carryover, is reasonable. Consideration must be given to the first-in-line, first-in-time sequence of using an NOL carryover specified in N.J.S.A. 54:10A-4(k)(6)(B) for purposes of implementing Subparagraph E. While plaintiff is incorrect in arguing that the extension period for NOL carryovers is four years for each NOL carryover that could have been used to offset income in the suspension year(s), the court agrees, in part, with plaintiff’s proffered computation of the NOL carryovers and extension periods under defendant’s construction of Subparagraph E. Although defendant did not apply its regulation, N.J.A.C. 18:7-5.17(c), in computing the extension period(s) and amount of NOL carryovers but followed a 2015 bench opinion of the Tax Court in this regard, the court finds the regulation invalid as it imposes a condition beyond the scope of the language and intent of Subparagraph E. The court affirms defendant’s denial of plaintiff’s refund claim attributable to the Alternative Minimum Assessment tax credits.